Company overview - iCar Asia Limited is an Australia-based company, which is engaged in the development and operation of Internet-based automotive portals in South East Asia. The Company's segments include Malaysia, Indonesia, Thailand and Corporate. It offers a Response Management System (RMS). It brands include Carlist.my and LiveLifeDrive.com in Malaysia; Mobil123.com and Otospirit, in Indonesia, and One2car.com, Autospinn.com and Thaicar.com in Thailand. Carlist.my connects car buyers and sellers to a single platform, which encompasses car classifieds and content. Mobil123.com is an online automotive classifieds Website with over 200,000 listings. Mobil123.com allows both motor vehicle dealers and private sellers to list cars for sale. Autospinn.com is an automotive content Website. The Company's subsidiaries include iCar Asia Pte Ltd, iCar Asia Management Services Sdn Bhd, Netyield Sdn Bhd, iCar Asia Sdn Bhd, PT Mobil Satu Asia, DQBP Sdn Bhd, One2Car Co., Ltd and Perfect Scenery Ventures Limited. 

ICQ Details
 
Optimizing market leading position in used cars:During Q1FY17, iCar Asia Ltd. (ASX: ICQ) reported 29% year-on-year growth in cash collections at A$2.51m, highest ever quarterly cash receipts for the company and finished the period with A$23.84m in cash and cash equivalents at 31 March 2017. The company has had a solid start to 2017 as the earlier strategic initiatives led to strong operational results during the quarter. Overall listings grew by 26% yoy, including 51% growth for Malaysia and 47% growth for Thailand, while reporting 29% yoy growth in total leads for March 2017. Further, the company witnessed strong increases in paid accounts as it grew by 25% yoy in total and 77% uplift in the number of bumps across the Group (bump is product which pushes a listing to the top of a relevant search result). The Q1FY17 marketing campaigns have delivered an added vibrancy into marketplaces in the lead up to the key buying periods across markets and further strength in the business can be seen in strong market share position in used cars and with automotive advertisers. In Q2FY17, the company expected to take a larger step into the new car space, which represents an area of incremental growth where, although iCar Asia holds the market leading position in the digital space for new cars.



Source: Company reports
 
Growth opportunity in New car and Used car segments:The company’s potential markets offer a huge growth with new car digital spend of $350 million. As the markets mature, the online share of New Car advertising spend is predicted to increase from 15% to 24% by 2021 (Australia is currently 49% and UK at 52%) and generate an addressable online market of more than $800m. The used car markets continue to embrace online marketing channels and expected to generate a margin of $3.7b by 2021. The company has largest automotive shopping portals operating in three largest automotive markets Malaysia, Indonesia and Thailand. These three markets have over 1 million car transactions per year per country offering huge growth potential for the company. The revamp of media offering with improved audience segmentation and expanded proposition into finance, insurance, parts and accessories would also support growth prospects of the company.



Future potential; (Source: Company reports)
 
Further, the catalysts such as TV marketing to drive App and messaging adoption, used Car Dealer App and pricing restructuring, launch of a revised New Car Dealer and OEM proposition, audience segmentation are expected to drive revenue growth and expansion into commercial vehicles, motorbikes and parts & accessories.
 
Fully modernized New Car offering: Recently, the company has launched a highly innovative new car section that will reinvent the way consumers search and buy cars. One of the core features is a Machine Learning Platform that uses a chatbot, to aid in all things to do with buying, selling and owning a car. These new offerings were launched at the Carlist.my Drive – Test & Buy Event 2017, a first of its kind in Malaysia and held in Kuala Lumpur, which attracted close to 20,000 New Car buyers, and produced over 3,000 people registering to test drive from a selection of 50 new car models from 15 automotive brands. iCar Asia is now planning to expand the concept to Thailand and Indonesia. The development of a Dealer Mobile App in the fourth quarter of 2017 is expected to enable car dealers to be more engaged with ICQ’s platforms by managing their business and customers using the company’s tools. At the center of this application is a messaging platform that will allow the car buyers and car dealers to connect seamlessly in a WhatsApp-like messaging experience. This would enhance the conversion and the volume of leads, reinforcing the value in the marketplace to car dealers.
 
Gaining the momentum in FY17:  In FY17, the company is expected to launch number of major products, which will drive the leads. There will also be changes to the New Car product in all markets and modern technologies introduced to make it easier for advertisers to connect to premium segmented audiences on iCar Asia’s sites. New campaigns are expected to drive brand awareness, and audience and leads growth in the lead up to the key local automotive buying periods in each geography. Additionally, ICQ will expand proposition into finance, insurance, parts and accessories.
 


H1FY17, key strategic milestones;(Source: Company reports)
 
FY16 impacted by decline in car sales and increased costs:FY16 was a challenging year for the group with tough economic conditions that saw new car sales decline year on year in Malaysia and Thailand and low levels of growth in Indonesia. Despite this, the digital transformation of the automotive industry further increased with consumer behavior shifting to online channels for the buying and selling of cars. For FY16, ICQ’s consolidated revenue grew by 6% year on year while NPAT and EBITDA witnessed a loss of 20% and 21%, respectively. The revenues were impacted by the economic conditions, reduced car sales volumes and horizontal Classified competition. Other adverse factors were depreciation in revenue-generating currencies vs the Australian Dollar and the passing of His Majesty the Late King Bhumibol of Thailand, which significantly lowered Thai business activity in the last quarter of the year. On a FOREX-neutral basis Group revenue grew 10% year on year. Further, the company costs rose with more people (expansion of Product & Technology and Sales teams) and rise in marketing spend in H2FY16. Additionally, during 2016 the Company had expanded its technology teams to put the infrastructure in place to deliver rapid improvement of the user experience for buyers and sellers.



FY16 performance; (Source: Company reports)
 
Stock Performance:ICQ stock fell over 68% in the last twelve months (as of June 06, 2017) and currently trading at its 52-week low levels. The stock has fallen on account of the volatile conditions in the ASEAN Region for Automotive Industry and decline in overall car sales during FY16. Further, the stock also got removed from All Ordinaries Index effective March 20, 2017. The group witnessed a lower than estimated new car sales growth in Malaysia and Thailand while reported a weak overall Indonesia growth. However, the stock has risen over 8% in the last six months and the momentum is expected to continue going forward, given the growth of automotive industry as consumer behavior shifting to online channels for the buying and selling of cars. We give a “Buy” recommendation on the stock at the current price of $ 0.275
 

ICQ Daily chart; (Source: Thomsom Reuters)

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